The EU objective risks narrowing the European vehicle industry

Global European car manufacturers such as BMW, Volkswagen and Renault are increasingly criticizing the European Union’s decarbonisation regulations, which, in the spirit of the green transition, require a 50 percent reduction in carbon dioxide emissions from internal combustion engines by 2030, and the ten complete withdrawal from the European market within a year.

Oliver Zipsethe CEO of BMW, at this year’s Paris Motor Show, drew attention to the reconsideration of the regulation and its significant relaxation, stressing that the planned changes “would shrink the industry as a whole”, moreover, all this in such a sensitive period when European manufacturers are competing with consumers for favors against cost-effective Chinese competitors.

To learn more about how BMW is tackling the green transition and how it feels about EU tariffs on Chinese electric vehicles, Max-Morten Borgmannt, spokesperson for government affairs and business communication of the BMW Group, was asked by Economx.

Nice goals, unattainable conditions

According to the spokesman, the goals set by the EU institutions for 2030 and 2035 are a serious challenge for the European automotive industry and can only be achieved with a high proportion of electric mobility.

However, the main challenge is not the availability of electric vehicles, but in the insufficient infrastructureas well as the rare and therefore expensive in battery raw materials lies.

These bottlenecks prevent customers from switching to fully electric mobility.

says the spokesperson.

In order for the goals set by the European Green Agreement to be met, according to BMW’s point of view, a significant development of the EU charging infrastructure and a reduction of raw material costs would be necessary.

Does BMW have anything to fear?

Although Chinese electric vehicle companies are aggressively expanding into global markets, Max-Morten Borgmann says there is no reason to worry for BMW, given the premium quality offered by the German giant. BMW has a well-positioned product strategy to meet all market needs – regardless of electromobility or technological openness.

As for the fierce competition in the electric car industry, the company relies on the appeal of its (luxury) products to compete with the more cost-effective production of some electric vehicle manufacturers and at the same time to further develop its technological capabilities.

EU tariffs as backfire weapons

According to Max-Morten Borgman, the efforts of the European Union which stricter regulations and tariffs are imposed on Chinese importsto create a level playing field for European producers,

they are harmful and achieve the exact opposite of their intended purpose.

Tariffs and similar protectionist measures generally harm the competitiveness of companies operating at the global level. Therefore, the BMW Group clearly positions itself in favor of free trade and against protectionist measures.

he said Max-Morten Borgmann.

Beyond purely electric solutions

According to the German brand, the answer to the challenges of the European automotive industry is not the introduction of protective tariffs, nor the transition to a fully electric drive, but technological diversification. European manufacturers currently rely heavily on Chinese battery makers for lithium-ion batteries, which are key to electric vehicles. Oliver Zipse, the company’s CEO, also drew attention to the connection between the refinement of green objectives and the independence of the supply chain at the Paris Motor Show.

He pointed out that the correction of carbon neutrality in 2035 as part of a comprehensive carbon dioxide reduction package would also allow traditional European manufacturers to rely less on China for batteries.

BMW’s general position is that the European car industry should refrain from relying exclusively on battery electric vehicles in decarbonisation. For supply chain independence, Europe needs to remain technologically open and continue to invest in other zero-emission alternatives, such as hydrogen fuel cell technology. According to the company, hydrogen is an additional carbon-neutral option that offers a solution to the limitations of battery technology, especially as the raw materials used for batteries become increasingly scarce and expensive.

Unlike the production of internal combustion engines, the economic principle that increasing production – automation – automatically reduces costs does not apply in the battery industry, since it relies on limited raw materials such as lithium and cobalt, and increased demand increases raw materials, thus also the prices of batteries.

According to BMW, decarbonisation policies should focus on reducing emissions in the short term by using several technologies at once, rather than imposing a “one-size-fits-all” solution, for example by exclusively promoting electric cars.

The Bavarians are currently working on hydrogen-powered vehicles, which are expected to be available in the near future.

Could tariffs lead to factory closures in Europe?

The introduction of protective tariffs on Chinese electric cars has divided European manufacturers, but according to the final decision, the European Commission for five years from October 31 can raise it by up to 35.3 percent the already valid 10 percent customs dutywhich burdens Asian companies. The measure was supported by 10 member states, including France, Italy and Poland, 12 abstained, and

only five nations voted no, including Germany, which has a significant Chinese export market, and Hungary, which has serious investment interests.

Both BMW and Volkswagen expressed serious criticism of the EU decision, and the German automotive industry association, VDA, welcomed Germany’s counter vote.

Carlos Tavaresthe CEO of Stellantis, owner of Fiat, Citroën and Vauxhall, stressed that the protective tariffs would force China to move its production to Europe, thereby putting it in direct competition with European brands, which could ultimately lead to a series of factory closures. Furthermore, Beijing does not move its plants to the heart of the European automobile industry, i.e. to Germany, France or Italy, but to its partners that promise cheap energy costs and labor, such as Hungary, a good example of which is the investment in the BYD factory in Szeged.

Sales continue to decline

European car production – which accounts for 7 percent of the EU’s GDP and employs nearly 14 million European workers – fell significantly between 2019 and 2022, and then showed a small increase in 2023. However, the number of newly registered cars in the EU is still lower than before the 2019 Covid epidemic, and the proportion of electric vehicles is still very low.

of the European Automobile Manufacturers Association (ACEA) data according to September 2024, the number of cars newly registered in the EU fell in three of the four main markets of the region: the market also shrank in France (-11.1 percent), Italy (-10.7 percent) and Germany (-7 percent), and it only expanded in Spain (+6.3 percent).

Although pure electric cars accounted for 17.3 percent of the EU car market in September with 139,702 cars sold (an improvement compared to last year’s result), the market volume was still 5.8 percent lower compared to the same period last year, the total market share and it weakened from 14 percent to 13.1 percent, which can largely be explained by the marked (28.6 percent) drop in Germany.

The registration of plug-in hybrid cars also fell sharply: in September, plug-in hybrids accounted for only 6.8 percent of the car market, with 54,889 units sold. On the other hand, the registration of hybrid-electric vehicles increased by 12.5 percent, so this month their market share of 32.8 percent surpassed that of gasoline and diesel-powered vehicles.